30 November 2006 Daily Comment

Thoughts

Today is the last day of the
month so we donít expect a sell off. Overnight Asia was
higher with Japan
up over 1% and Hong Kong up almost 1%. European bourses
are mostly higher and U.S.
stocks will open mixed. The retail sales numbers were some good, some bad, and
Wal-Mart had its first down month (by 0.1%) in many years.

Oil is approaching $63 and Gold
is up a coupe of dollars at $645.

Jobless claims were 357,000 which
were greater than expected and gave a bid to treasuries which are lower in
yield and higher in price.
*****

Ford expects
spend $17 billion by 2009 with most of that being expended in the next year as
40 percent of its hourly workers voluntarily leave their jobs.

Ford said that it projected a cash outflow of $10
billion from automotive operations and $7 billion related to its reorganization
plan. That is just $1 billion less than the amount Ford said this week it would
borrow by pledging most of its domestic assets as collateral.
*****

From Reuters: Entergy Corp. will shut the
979-megawatt Unit 2 at the Indian Point nuclear power station Thursday for
short work, according to electricity traders. Officials at the company were not
immediately available for comment on the outage.

It is interesting that electricity traders know about this event before
the general public.
*****

We have been buyingFord, Qwest, Sony, Walgreen,
Fifth Third, Palm and Wild Oats in smaller accounts that didnít own
these stocks.
*****

We sold our Andrew
position for a fifty pennies gain in our large/aggressive accounts
and in those same accounts we bought Boston Scientific at $15.90 and the Gap at $18.60.

Yes Phyllis we bought The Gap.

Everything seems to be wrong with
The Gap. Because things are so bad
but because it has great cash flow
and still has earnings and the
company is priced at less than saleswith $2 billion in cash on hand it has
become the subject of taking private rumors. Things have been bad for three
years since Mickey left. †Todayís same
store sales numbers for GPS were again abysmal and we donít expect a turn
around this year but we are guessing there are at least a couple of points in
the shares before next March.

We have been in and out of Boston Scientific for the last year and
we are taking a trading position for an over year end bounce as all the Guidant
folks who unfortunately took BSX stock on the merger abandon ship through year
end.
*****

This is a link to the December
letter of Bill Gross the fellow who runs $500 billion in bond money for large institutional
investors.

This line from that letter is
especially prescient: that is why investment management is partially art, partially science,
and at least a small part BS .
*****

We read in the NYT last night
that bonuses on Wall Street have gone from $8 billion in 2002 to $35 billion
this year. That item seems to suggest that a lot of good news is priced into
the marketplace. Remember that the bonuses donít come out of thin air they are
taken from the pockets of investors.
*****

European bourses closed lower across the continent with some
country indexes losing over 1%.

Oil ended up 67 pennies at $63.13 and Gold was up $11 to $652. It is month end as all the big boys and
girls who run hedge funds and hold long commodity positions know.

Treasuries rallied with the two-year closing at 4.62% and the
ten-year at 4.41%.
*****

The DJIA closed down 5 points at 12222. The S&P 500 gained 2 points to 1400 and the NAZZ was flat to 2430.

Breadth was positive and volume
was active.

There were 395 new highs and 60 new
lows.

And a snow storm is scheduled for
Chicago for tomorrow with thunderstorms
in NYC. Here in the land of milk and honey we expect clear skies and cold
weather. Winter has arrived right on schedule. There is one more casino day this
week allowing the big boys and girls to play their fund games.
*****

29 November 2006 Daily Comment

Thoughts

Can the last two days have encompassed
the correction? Stocks futures are higher this morning and Asia
was up over night as is Europe this morning. Treasuries
are easing a bit and Oil is $61.11 up 12 pennies while gold is down $3 at $641.

Investors Intelligence has Bulls at 58% and Bears at 22%. As a
contrary indicator those numbers are bearish but it is year end and so we are
mindful but not acting on them.
*****

Preliminary 3rd Quarter GDP was
up 2.2%.
*****

Tellabs was downgraded
by a Lehman analyst today and we guess that is the reason the shares sold off
10% yesterday through today. The analyst lowered his per share earnings estimate
by 1 penny for the quarter. We are adding shares at $9.98
to many accounts.
*****

We added shares of
PALM at $14.15 to many accounts that we didnít add to yesterday.
*****

35,000 Ford workers have accepted buyouts. That number exceeds Fordís
desire for 30,000 to take the buyouts. At least Ford wonít file Chapter 11
bankruptcy because the Ford family has too much ego tied up in their ownership
of the controlling stock. The family took their money and ran a long time ago
but the honor of the Ford name is probably enough for management to try and
keep the company out of bankruptcy. Yesterday Ford announced is was borrowing
$18 billion. Too bad they didnít keep the $10 billion dividend they paid in
2000 and the money they squandered on buy Volvo and Jaguar and Land Rover.

Last night on PBS TV the
Frontline show discussed the United
Airlines foisting of its pension liabilities on the taxpayer by
surrendering its pension plan to the Pension Guaranty board. That bankruptcy
tactic caused pensions for UAL workers to be lowered forcing many to go back to
work to make ends meet.

The show mentioned Chapter 11 bankruptcy
as a preferred way for corporations to get out of financial difficulty. They
interviewed lawyers and bankers with big smiles on their faces extolling the
wonders of Chapter 11. The only folks who lose are the workers and retirees.

US Air is trying to takeover Delta
Airlines which is still in bankruptcy. As we mentioned last week we
expected Delta executives and even bondholders to object to the US Air takeover
attempt. Thatís because Delta is still in bankruptcy and so the executives and
bondholders havenít yet fashioned the sweet stock option deals that would make
them rich with no risk.
*****

We added Walgreen
at $40.72 to mid sized accounts that didnít own it. And we added Sony at $39.50 to our larger/aggressive accounts.
*****

Oil ended up 147 pennies at $62.46 in NYC. Gold was down $2 at $642. Treasuries
were flat with the two-year t 4.68% and the ten-year at 4.52%.
*****

European markets closed higher across the continent.
*****

The major measures recaptured
their early gains after a midday pull
back and closed on their highs for the day. The DJIA was up 90 points at 12225. The S&P 500 rose 13 points to 1400 and the NAZZ jumped 19 to 2432.

Breadth was 3/1 to the good on the NYSE and 2/1 positive on the
NAZZ and volume was OK.

There were 395 new highs and 60 new
lows.

And tomorrow retail sales number
will keep the big boys and girls busy with their fund games at the casino.
*****

28 November 2006 Daily Comment

Thoughts

This is catching a falling knife time in the stock markets. The markets
tone changed bullish to bearish over the week-end. Maybe it was the sight of
all those idiots pushing each other through doorways to spend money on items
they donít need that changed the trend in the markets. Whatever it was traders
are on the defensive and looking for stocks to short rather than buy.

We are of the opinion that what
is occurring is not unusual for this time of year. What was unusual was that
there was no September/October correction. In past years there have been many
November/December sell offs. Some have lasted all the way to year end with a
true New Yearís bounce. Others have been of a one or two weekís duration with
the bounce beginning in mid-December. We arenít prescient enough to know which
will occur but we do think that this drop is overdue and temporary. And we also
think that the scarier the better.

Of course if the drop wipes out
our hard earned gains of the past few months we wonít be happy but we will be
given the opportunity to fill out our portfolios with stocks on sale. We own the
core of what we plan on keeping into the New Year and will use a come down in prices of the stocks we own
to build positions.

Any top that is coming will
happen next year. We donít think we have seen the top for this bull run.
*****

Overnight Asia
caught up with the drop in U.S.
markets with Hong Kong off 2.9% and other exchanges down
less. European markets were fractionally lower at midday.

Oil is up 30 pennies to $60.71
and Gold is off a few dollars at $637.

Durable Goods orders were down
8.3% after being up 8.7% last month. Ex transportation Durable Goods orders were
down 1.7%.

Traderís memories are but a
moment long and so Treasuries have rallied on the lousy numbers with the
ten-year at 4.58% which is back to its March low yield. The two-year is at
4.67%.
*****

Mother Merrill dropped Palm to neutral from buy after Palm
announced that earnings for the present quarter would be in the 11 pennies
range when 18 pennies had been expected and revenues would be under $400
million when above $420 million was the guestimate.

Palm gave the delay of the introduction
of the Treo 750 in the U.S.
as the reason. The Treo will be introduced next week rather than at the
beginning of November as had been previously forecast. The Treo 750 is already
being sold in Europe.

BankAmericaís kept its buy rating
on Palm although it dropped its price target to $18 from $20.
*****

Eaton Vance introduced a $2.3
billion closed end fund today that they say will earn a tax advantaged 9% per
year. glad to know they can earn that kind of money when Treasuries earn 4%.

Closed end funds are a boon to
stock brokers who make a big underwriting commission and† a bane to the initial buyers who soon see the
fund move down to a discount when the folks who sold them the fund move on to
other products. Closed end funds should be outlawed.
*****

Comcast Corp. has become the
first U.S. cable operator to take on telecommunications rivals in the cell
phone market, having introduced the service in two cities. Comcast, the largest
U.S. cable
television operator, launched the new service in Boston
and Portland, Oregon,
earlier this month after a year-long trial.

Time Warner Inc.'s TWX cable unit
and Cox Communications expect to introduce their own wireless services early in
2007.

The three cable
companies plan to use the wireless network of No. 3 U.S. mobile operator Sprint
Nextel Corp. as part of an agreement reached last year.
*****

We added shares of
Palm at $14.20 to small accounts that didnít own it and to some of our
larger accounts and have also added shares of Sprint at $19.40,
Ford, and Fifth Third to some of our large accounts.
*****

Research in Motion which makes the Blackberry is priced at $24 billion net of cash in the marketplace and has sales
of $2.8 billion. Palm is priced at $1.1 billion
net of cash and has sales of $1.5 billion. Obviously the Blackberries that
RIMM makes are the toy of choice for the investment community and we think that
has something to do with the disparity. Moreover PALM is not delivering but if
they do and if they can regain some parity the potential gain is not yet in the
stock price. Look at Apples performance over the last few years as they
developed the toy of choice for music listening.
*****

Guru Bernanke spoke to the
Italian American Association in New York
today and said that the economy is OK and that he is worried about inflation.
On that big news (?) Treasuries moved back to even on the day after a morning
rally and the major stocks measures moved into negative territory after
managing to mount a rally from an early morning lower opening.
*****

Citadel Hedge Fund is planning on
selling $2 billion in bonds to the public to use to trade in the markets.
S&P 500 is giving a BBB+ rating to these bonds. We learned this from www.minyanville.com. We watched SEC Chairman
Cox on CNBC today announce steps to protect the public. One step would be to
outlaw this type of borrowing. It is one thing for hedge fund investors to risk
their money. At least they have the chance of outsized gains and are supposedly
capable of handling the losses. But to loan money to a hedge fund for a 6%
return so that that hedge fund can speculate with the money is ridiculous.
*****

Oil closed at $60.99 in NYC up 67 pennies. Gold eased down $3.40 at $634 and Treasuries closed higher on the back of a good two-year note auction
after being up and then down earlier in the day. The two-year ended at 4.68%
and the ten-year at 4.50%.

European bourse indexes across the continent were mixed small fractions at their close.

The DJIA gained 15 points to close at 11235. The S&P 500 gained 5 points to 1386 and the NAZZ rose 7 points to 2413.

Breadth improved into the close and was 2/1 positive on the NYSE and
5/4 positive on the NAZZ and volume
was moderate.

There were 200 new highs and 70 new
lows.

There are
three more fund days this week at the big casino.
*****

27 November 2006 Daily Comment

Thoughts

We are back in the saddle for the
rest of the year. While we were away the markets mostly meandered. Overnight Asia
was mixed with Japan
up almost 1% and Hong Kong lower and at midday European bourses are taking a cue from U.S.
stocks and are lower across the continent. Treasuries are a tad weaker and Oil
is up a bit at $59.41 while Gold is $9 higher at $538 is the early morning
going.

The CNBC talk is all of retail
sales which, except for Wal-Mart, seem to have been good over the weekend. The
media is overdoing the coverage but then that is now the mediaís modus operandi
with everything.

Weíve noticed the last few weeks
that good news is great news and bad news is no news when it comes to moving
stock prices. We donít know how long this take on stocks will last but it is
true for now, especially with the hot stocks that the big boys and girls like
to play.

For example BankAmericaupgraded Loweís
today while noting that fundamental problems (housing sales falling and
competition increasing) havenít been resolved but expressing the hope that the
rise in stock price suggests that the street
is recognizing future potential.
*****

There was weakness in the dollar
on Thursday and Friday. That weakness was met by strength in Treasuries and a
yawn form stocks which makes no sense.

On Friday the dollar was lower
and Treasuries gained which is counterintuitive and may have been a result of
thin markets.

Normally a falling dollar would
cause Treasuries to move lower in price and higher in yield. That is because foreigners
who hold dollars need higher yields (lower prices on the bonds) to make up for
the losses they experience in the exchange rate. A lower dollar means that it
buys less yen. Treasuries pay in U.S. dollars and foreign investors have to
convert that interest payment or proceeds of sale or redemption into their home
currency with dollars that buy less of that currency.
*****

Two hours into the trading day
and the major measures are over 1% lower in active trading. For the rally to
gain steam a two week correction that creates a little fear would be
beneficial.
*****

With the sell off
today we are going to begin building positions for year end. Our guess
is that there will be a resumption of the rally by year end and that the faster
and deeper the correction the better the rally will be.

We are
repurchasing Verizon at $34.75. VZ has spun off its yellow pages
business. At present levels the shares yield over 4%.
*****

We bought Veeco
at $19.40 for many accounts. We have traded this stock over the years. Recently
the CEO resigned as CEO but will maintain his position as Chairman and the company
is seeking a new CEO. The company is priced at 1.5 times revenues and is trading
within two dollars of its low for the year with a high of $27 in May.

Veeco engages in the design,
manufacture, marketing, and servicing of equipment used by manufacturers in the
data storage, semiconductor, high brightness light emitting diode, and wireless
telecommunications industries worldwide. Its process equipment products deposit
or remove various materials in the manufacturing of thin film magnetic heads.
The company operates through three segments: Ion Beam and Mechanical Process
Equipment, Epitaxial Process Equipment, and Metrology. The Ion Beam and
Mechanical Process Equipment segment deposits or etches thin film products,
primarily used in the manufacture of data storage components, such as thin film
magnetic heads and compound semiconductor/wireless devices. The Epitaxial Process
Equipment segment provides molecular beam epitaxy and metal organic chemical
vapor deposition products to high brightness light emitting diode and wireless
telecommunications customers. The Metrology segment offers equipment that is
used to provide critical surface measurements on products, such as
semiconductor devices and thin film magnetic heads. It also includes atomic
force microscopes, optical interferometers, and stylus profilers sold to
semiconductor customers, data storage customers, and research facilities and
scientific centers. The companyís solutions are also used as a key research
instruments in universities and scientific laboratories, as well as in
industrial applications.
*****

We added Fifth
Third to some mid sized accounts that didnít own it and also added more shares of National City to our large accounts.
*****

We are also buying
Starbucks and Walgreen in small amounts in our very large/aggressive
accounts.
*****

Mother Merrill
reports that there are $370 trillion in derivative financial contracts
outstanding at the end of June 2006. That is a 25% increase over last year. Misreading
the potential liabilities of certain derivative contracts is what caused the Long Term Capital hedge fund financial
crisis in 1998. most of those trillions of dollars of futures contracts are properly
hedged but as with the hedge fund that lost $5 billion in a week on improperly
hedged natural gas contracts last September we would guess that there are more
than anyone knows improperly hedged financial contracts in that $370 trillion
number.

The problem is that the
improperly hedged label never applies until it is too late to do anything about
it. To whom do they sell?
*****

Oil ended up over $1 at $60.32 as supply disruptions were expected
from a mortar attack in Iraq.
Gold also finished $11 higher at
$647. Treasuries recovered to finish
firm with the two-year at 4.72% and the ten-year at 4.54%.

European bourses lost ground in their afternoon trading as U.S.
markets swooned and the indexes for most of Europe were
down close to 2%.

There was not even the hint of a
rally today as the markets sold off from the get go with the DJIA ending down 155 points at 12125.
The S&P 500 dropped 18 points to
1382 and the NAZZ lost 54 points to
2405.

Breadth was 4/1 negative and volume
was active.

There were 265 new highs and 75 new
lows.

It should be an interesting week
at the casino with retail sales and month end on Thursday.
*****

22 through 26 November 2006

We are traveling for the rest of the week and if
you looking for an educative read we suggest that you visit our website http://www.lemleyletter.com/lemley_iraqiran.html
that gives a chronological history of the of the worlds major religions, the
occupation of Jerusalem over the years, and an Iran/Iraq timeline plus explains the difference between Sunnis
and Shiites.
*****

21 November 2006 Daily Comment

Thoughts

Asia was
higher overnight as is Europe at midday. The markets have been up six of the last seven
days, and seven of the last eight weeks and that trend should hold through the
end of this week. Thanksgiving week is usually (75%) positive for the markets.

Gold is up $3 at $625 and Oil is
up a few pennies at $59.33. Treasuries are flat with a positive tone.
*****

We repurchased
Palm in many accounts at $15.88. Palm has a ton of cash and is
selling at about 1.2 times sales. Since last we owned the shares the same patent
outfit that held up Research in Motion (which makes Blackberries) for $750
million for patent infringement has sued Palm. That caused a drop from $17 on
the Palm shares and we are in for a trade through year end.
*****

That amount of money now must
exceed $8 trillion and is probably closer to $10 trillion.

Set tax rate at 15% with credit
for state income taxes. That will level the field for states that tax IRA
distributions and those that donít.

If $2 trillion (25% of at least
$8 trillion in 2006) is removed it would provide $200 billion to apply to
deficit (10% effective tax rate net of state tax credit offsets).

Also the $1.7 trillion would then
be taxable going forward. Assume a 5% taxable earnings rate on that money and
that is $80 billion of taxable income at 25% tax rate is $20 billion per year
to offset lost tax receipts from no withdrawals from the $2 trillion removed.
But as that $1.7 trillion grows over time tax receipts will increase.

All money in these plans is from
earned income. Many of those with large amounts of money in $1 million range
and above were teachers and middle income folks.

This plan lowers the tax rate but provides future income offsets.

Drug companies and others were
allowed to repatriate untaxed money from overseas in 2005 at 5% tax rate.
*****

Oil moved higher today ending at $60.17 up $1.37 in NYC. Gold also rose up $7 to 629. Treasuries were flat to better with the
two-year at 4.77% and the ten-year at 4.58%.

European bourse indexes closed mostly small fractions higher.

The DJIA gained 5 points to end at 12321. The S&P 500 was up 2 points to 1402 and the NAZZ gained 2 points to 2455.

Breadth was 5/4 positive on the NYSE and slightly negative on the
NAZZ and volume was moderate.

New highs contractedto 390
and new lows were 65.

Bonds and commodities close early
tomorrow and everyone is off for Turkey Day. Friday could be volatile. Weíll be
back on Monday.
*****

20 November 2006 Daily Comment

Thoughts

We
are back for two days before we head
off to Chicago for Thanksgiving and client visits.

The week of Thanksgiving is
usually kind to the markets although this morning stock futures are lower.

Overnight Asia was mostly lower
with Japan down 2% and Hong Kong off 1% while Shanghai was 2% higher. Europe is
lower and Gold is at $624 while Oil is off at $56.30. Treasuries are better.

Blackstone Group is going
to buy Office Equity Properties REIT for $36 billion including
debt. Sam Zell owns 2% of the company. He is from the
buy low sell high school of real estate investing. All the other office REITS
are up on hope.

The NAZZ wants to buy the London
Stock Exchange for $5 billion.

In the buyout craze currently occurring too much money is chasing too few goods and these
things always end badly at some point in time. We hope we are in cash when the
denouement occurs. Stocks are running up on takeover rumors and those rumors
are proving to be true and so more stocks run up. The markets are in a
goldilocks phase.
*****

Schwab is selling its US
Trust Division to BankAmerica for $3.3 billion. That used to be a lot of money
but in todayís takeover world it is only the price of 30 Picassos.
*****

We
sold our St Jude Medical position at $36.70 for a scratch. Given
that the shares price dropped to $32 right after we purchased the stock we are
happy with the sale.
*****

Two weeks ago we sold Williams
Sonoma at $32.15 because we didnít want to hold the stock though what we
thought would be lousy earnings. The share price ran up to $35 the day before
earnings and we were feeling a little perturbed. But then earnings came and the
share price dropped $3 to $32. We thought the shares would drop $3 but we
expected the drop from the $33 level not the $35 level.

Whatever, today WSM shares are trading at $30.30 and we reestablished
our position in the company. So all is well that end well. Actually
this is again a beginning and we will hope this trade ends well.

We
also added Qwest to larger accounts at $7.79 which is almost $1
lower than our first purchase. We will buy more in all accounts if it drops
another $1 or at year end if it remains at this level.
*****

Europe closed higher.
*****

Oil ended off a bit at
$58.78 and Gold was $622. Treasuries closed flat on the day.

The DJIA lost 30 points to
finish at 12310. The S&P 500 was off 1 point to 1400 and the NAZZ
gained 6 points to 2451.

Breadth was flat on the NYSE
and 5/4 negative on the NAZZ and volume was moderate.

There were 500 new highs
and 60 new lows.

And there are two more trading days
till Turkey Day. The big boys and girls will begin flying the coop tomorrow
night.
*****

15 November 2006 Daily Comment

We will be
traveling on Thursday and Friday and so there will be no posts until Monday
November 20.

Thoughts

Asia was
higher overnight with Hong Kong and Shanghai
both up over 1% and European bourses are also higher at midday. Gold is down $6 at $619 in NYC and Oil is higher
by a bit at $58.40. Treasuries are flat.
*****

US Air is making an $8 billion bid for Delta. Delta is still in
bankruptcy so the folks who run Delta havenít had a chance to get their new low
priced stocks and options. Our guess is that Delta management will try and
quash the deal.
*****

Micron has
popped 10% in the last two days on the rally in the chip stocks and we are unloading our position for a scratch. We didnít want to buy
any more when it was lower and that is an indication. Moreover, we are more
comfortable with our Texas Instruments
and Intel holdings more and we are
happy to get out even.
*****

We are selling our
Tiffany for a scratch in some accounts to a $2 profit in other accounts.
We also sold our Pier One for 60 pennies per
share profit. If a takeover comes in PIR it isnít going to be at much higher a
price than $9 and if it doesnít occur the share price is probably going to $5
by year end.

Our feel for retailers has been
punk and they all seem too expensive to us.
*****

As the markets move higher here
we are raising cash and putting off purchases. We are doing this as a
discipline. The stock markets are not behaving as they usually do at this time
of year. We will not sell all our holdings but we are mainly eliminating those
stocks that made us uncomfortable on down days in the market which have
admittedly been few recently.
*****

The Fed minutes from October
24-25 meeting were released today and the phrase "All members agreed that the risks to achieving the anticipated
reduction in inflation remained of greatest concernĒ caused Treasuries to
sell off.
*****

The Model Portfolio exceeds $600,000 in value tonight. When we began
the Model Portfolio 23 years ago with $50,000 we had no idea we would be so
successful. We have had two down years in those 23 years. We hope that the next
23 years are as kind to us and our clients as the last 23 have been.
*****

Oil ended at $58.76 in NYC and Gold
closed at $624. Treasuries gave ground with the two-year at $4.80% and the
ten-year at 4.61%.

European bourses closed higher
across the continent

The DJIA gained 35 points to close at 11252. The S&P 500 gained 4 points to 1397 and the NAZZ was up 12 points at 2430.

Breadth was 3/2 positive and volume was active.

There were 660 new highs and 80 new
lows.

And there are two more casino days
this week with CPI tomorrow giving the big boys and girls a delicious number to
trade off.

Keep the faith
while we are gone. Weíll be back Monday for two more days before we leave for
Turkey Day in the Windy City.
*****

Special Notice
Since we are going to be away for several days this week - and next - we present our
compilation of events in the Middle East for folks who wish to refresh their minds and have an hour or two to spend.

14 November 2006 Daily Comment

Thoughts

Asia was higher
overnight with Japan (which announced higher than expected GDP growth) and Shanghai both up over 1.5%.Hong Kong
was timidly higher. European bourses are lower at midday
and Treasuries are strong. Gold is flat and Oil is trading lower in NYC at $58.41.

The Producer Price Index was down 1.6% and the core PPI was down 0.6%.Year
over year the core PPI was up 0.6%. That is what has given Treasuries a
bid. Retail sales were down 0.2% and ex
autos they were down 0.4%.*****

Home Depot disappointed and Target and Saks pleased.

Wild Oats is closing 8 underperforming stores and taking a $25
million charge. That is a positive because the
street will think that the Burkle boys are in charge now.
*****

AG Edwards downgraded Sprint. Boooo!
*****

The CEOs of GM, Ford and Chrysler
are meeting with President Bush today.
*****

Supposedly a Danish fellow is preparing to bid for Pier One. The
shares are up $1 on the rumor.
*****

Most European bourse indexes
closed fractionally lower.
*****

We have to head off to a doctorís
appointment today and as we leave at 1pm
the major measures have inched into positive territory. Breadth is positive on
the NYSE and slightly negative on the NAZZ and volume is active. Gold is at
$625 while Oil is higher at $58.90. Treasuries are flat to slightly better

This week is option expiration
week and the casino has three more days of fund games in store for
participants.
*****

13 November 2006 Daily Comment

Thoughts

Asian markets were mixed to lower
small amounts overnight and European bourses are the same this morning. Gold is
down $7 at $623 and Oil is off 90 pennies at $58.69 in NYC. Treasuries are
firm.

Wal-Mart reports earnings on Tuesday
as does Target. Home Depot is also on tap and Starbucks will report. Hewlett
Packard reports on Thursday as will Dell Computer. Those are the stocks that
will be the focus.
*****

The Justice Deportment is looking
into collusion on buyout front. And more talking heads are mentioning a bubble
in what used to be called leveraged buyouts but now are called private equity
deals. The term leveraged buyouts conjure up Drexel Burnham and all the bad
stuff associated with that era.

This time around companies are
taken private and immediately the companies borrow a ton of money and pay a
huge dividend (taxed at 15%) to the folks who took them private which always
includes former management. Those bonds are then sold to the public who assume
the majority of the risk of the deal. Thatís the same old same old Wall Street formula for making oodles of money on
the backs of ma and pa investor. So what else is new?
*****

Oil ended down at $58.58 in NYC and Gold was down at $526. Treasuries
were slightly lower with the two-year at 4.76% and the ten-year at 4.60%.

European bourses ended mostly higher.

The DJIA gained 24 points to 12131. The S&P 500 was up 4 points to 1384 and the NAZZ rose 15 points to 2405.

Breadth was 5/4 positive and volume
was active

New highs were 425 and new
lows were 80.

And there are four more casino
days left in the week. Tomorrow we get PPI and on Thursday we get CPI, Capacity
Utilization and Industrial Production which will all be good numbers for the
big boys and girls to pay their fund games.
*****

10 November 2006 Daily Comment

Thoughts

Asian markets were mostly lower overnight and European markets except Milan are lower at midday. Treasuries are firm and
Gold at $634 and Oil at $60.39 are both lower in NYC as the trading day begins.
*****

The chip stocks have been taking it on the chin recently and
Texas Instruments
is under $29.
We are buying shares
in many accounts.
*****

We continue to expect a pullback but do see an up market into 2007 and so we continue to initiate
ownership of companies that we think have relative value at present levels. Our approach has always
been to trade distressed stocks and in the last two months of the year that strategy can lead to some
gut wrenching decisions. Catching falling knives is never easy. Over time the rough spots have always
smoothed but when purchases or sales go the wrong way we always suffer a period of self examination
that hopefully leads to better results over the long term. And one truism that never fails is that we never
own enough when a stock is rising and always own too much when it is falling.*****

We
repurchased Schering Plough
in our larger accounts at $21.30. We think the bulk of the reaction to
the Dems is over for Pharma.
*****

At 12:30pm the DJIA is lower but there are more stocks up than down today. We are going to begin the
week-end early by taking a walk in a beautiful snow.

The casino will be open for business a usual on Monday.
*****

9 November 2006 Daily Comment

Thoughts

Asia
markets were mixed overnight as are European bourses at midday. Gold is up to $620 in NYC and Oil is also higher
at $60.50. Treasuries are unchanged.

Cisco had good earnings last night and was positive on its outlook
and the share price is higher this morning. That may give the major market
measures a boost in the early going.

Jobless claims were down 20,000 to 308,000.
*****

The Bank of England raised its
key interest rate to 5%.
*****

We are awaiting a correction
before taking more action. We donít think the markets have factored in or
reacted to the change in government that has occurred. It has been fourteen
years since the Dems controlled the Congress and many of the folks trading big money
these days were in highs school or college at that time.
*****

Oil ended up $1.33 at $61.16 in NYC. Gold jumped $17 to $637. Treasuries
were unchanged with the two-year at 4.75% and the ten-year at 4.63%.

European bourses ended mixed.
*****

The DJIA lost 73 points to close at 12103. The S&P 500 dropped 7 points at 1378 and the NAZZ lost 9 points to 2375.

Breadth was 2/1 negative and volume
was brisk.

There were 350 new highs and 75 new
lows.

And the casino is open one more
day for the big boys and girls to play their games.
*****

8 November 2006 Daily Comment

Thoughts

Overnight Asia
was lower and European bourses are lower at their midday.
Gold is off a few dollars to $623 and Oil is up to $59.94.

The Dems win the House and
probably the Senate. The talking heads are talking about the election results but
not saying much. The TV political gurus canít bring themselves to admit that
the Dems probably have the Senate to go with the House. The Dem win was greater
than the markets expected and there may be correction and rotation over the next
few days as the street comes to grips
with reality.

We do think that budget discipline
will reappear (although the street
and pundits will deny this until it occurs) and that drug companies will suffer
for a while or longer as it becomes clear how aggressive the House will be in
going after the Medicare drug boondoggle.

We know Bush has veto power but
the Dems now have a say in the agenda which they havenít since 2000.

And the uncertainty that
currently exists is why we raised cash into the rally of the last few days
which made no sense to us.
*****

We repurchased
Intel is in the same amount in accounts in which we sold BMY
yesterday. Over the week-end we questioned our decision to eliminate our entire
Intel position last week. It was overly large in relation to our other
holdings. We did so to raise cash going into the election. Upon reflection we
concluded we wanted to own some shares. We are not buying back our entire position
but we are picking up shares for many accounts in a more proportional
percentage to the other stocks position in those accounts.
*****

We are going to add a few shares of Evergreen Solar to some aggressive accounts
today. We think the stock will get some play in the days ahead because of the
Dem victory.
*****

We are taking the afternoon off
for a bike ride. Indian summer is upon us and we are going to enjoy the last
few hours and days of warm weather.

As we leave the DJIA is down 25
points and oil is up at $59.85. Treasuries are a bit higher.
*****

7 November Election Day 2006 Daily Comment

Thoughts

Asia
closed small mixed overnight and European bourses are the same at midday. Gold is at $628 and Oil is off a bit at
$59.94. Treasuries are unchanged.

Bristol Myers
is going to give its interim CEO $2.3 million in cash and stock options to stay
on for a while. The BMY Board of directors has been free with shareholder money
for a long time. We are even on the stock and we are going to sell
BMY today.*****

Wild Oats increased sales and earnings and is trading a little
higher in the early going.
*****

Urban Outfitters reported a 10% drop in same store sales but an
increase in overall sales because it has 24% more stores in operation. The shares
are trading up. So what do we know? We now know that we are too old to be
involved with this stock at these levels.
*****

We are selling
Schering Plough ahead of the vote count tonight. We have a scratch
loss in it and we would rather be out than in at this point. As with BMY we
were hoping for a better rally at the end of October than occurred in these two
stocks.
*****

Oil ended lower at $58.93 in NYC. Gold finished at $627. Treasuries
rallied and the two-year was 4.77% and the ten-year was 4.66%.

European bourses were higher across the continent.

The DJIA closed up 50 points at 12155. The S&P 500 gained 3 points to 1382 and the NAZZ was up 10 points to 2375.

Breadth was 5/4 positive and volume was brisk.

There were 460 new highs and 50 new
lows.

And tonight the votes will be
counted and the big boys and girls will render their judgment tomorrow with
fund games at the casino.
*****

6 November 2006 Daily Comment

Thoughts

Asia was
mixed overnight with Japan
up a little and Hong Kong higher by 1%. European bourses
are higher at midday. Oil opened
lower in NYC at $58.89 and Gold is off a little at $629. Treasuries are lower
again this morning and higher in yield as more Fed members speak of inflation
and the odds of a rate hike again enter the market place.
*****

As we drove through Iowa
over the week-end we decided that Whole Foods was
a bit too dicey for us to own now at a P/E still over 30 with sales forecast by
management to grow at around 8% next year. We sold this morning for
a scratch.
*****

We are interested in the Wild
Oats which is off again today on a downgrade by Citigroup with earnings
expected tomorrow. Citigroup said Wild Oats' shares are less compelling after a
31 percent rise year to date(after todayís drop in price the rise is now only
15%) and 160 percent rise(now† 130%)
since its trough in early 2005. (That trough in early 2005 was when the shares collapsed
from $12 to $5 and occurred before Burkle began buying shares in January of
this year at the $9 to $13 range. Burkle owns about 17% of the shares through
his private equity firm Yucaipa.)

--Citigroup said the natural and organic foods
retailer has made great progress but the management change could lead to some
disruption in the near-term. (The current CEO Odak is retiring/out in March of
2007 and we take that as an indication the Burkle is now in control of the
company and that the new CEO will be a Burkle person).

With the stock down 15% today we are
adding more shares to large/trading accounts and will be buying more around on
any further drop. OATS is at the level where Burkle last bought shares. There
is a large short interest in the stock with more shorts piling on today but
that short interest is latent buying when the share price moves higher again.

Oats sells at 50% of sales and
WFMI is priced at 200% of sales. The reason for the disparity is that OATS has
failed to deliver performance and WFMI has over delivered. But WFMI has run in
to a slowdown and Burkleís track record suggests that he will be able to turn
OATS around or sell it.
*****

We are selling Urban
Outfitters. The shares sell at 3 times revenues and it is a broken
momentum stock and we violated our rules trying to trade it. We are uncertain
of the markets for the next month and with earnings on 11/9 we want to be out ahead
of them. When we bought URBN a few weeks ago we thought we would get a couple
of points pop higher into month end and instead we got a two dollar drop. Ugh!
*****

As a play on the election results
we bought a small amount of Evergreen Solar in
our large/trading accounts. ESLR makes solar power products.
*****

We have reconsidered our comments
of last Friday on the Williams Sonoma downgrade and decided today to go to the sidelines
ahead of earnings later this month. The rally today doesnít make sense to us if
the Dems are going to win one of the Houses of Congress. If they donít then the
stocks we continue to hold will do well.

We are selling WSM
at a $1 plus per share loss. A few weeks ago we had a $1 per share
gain profit and in the woulda coulda marketÖ..
*****

Oil closed higher in NYC at $60.02. Gold ended at $628. Treasuries
closed unchanged with the two-year at 4.82% and the ten-year at 4.71%.

European bourses ended higher by 1% or more across the continent.
*****

The DJIA staged a nice
comeback rally
after 6 down days recovering most of the loss to end up 117 points at
11202. The S&P 500 gained 15 points
to 1380 and the NAZZ rose 35 points at
2365.

Breadth was better than 2/1 positive and volume was active.

There were 320 new highs and 70 new
lows.

And tomorrow is Election Day. The
casino will be open for business as usual.
*****

3 November 2006 Daily Comment

Thoughts

Asia was fractionally
higher overnight on most exchanges and Europe is the opposite
at mid-day. Treasuries are weaker and Oil in NYC is down to$60.36 with Gold at
$598.
*****

Mother Merrill upped St. Jude and downed Boston Scientific so that is good and
bad news for us. But BSX has been in the doghouse and we think this is just one
more switch of analystsí sentiment that will help the stock make a low from
which to bounce.
*****

Oil is almost $2 lower at $59.06
and that is giving some legs to stocks at 10:30am.
*****

Most European bourses closed
fractionally lower.
*****

We took a few hours off to go
bike riding on a gorgeous fall day. We also wanted to keep our powder dry by
holding what we own and not buying more and we thought getting out of the
office would do the trick, which it did.
*****

Urban Outfitters didnít participate in todayís rally and we decided
to take our 50 pennies loss in our large/trading accounts and look at the
stocks after November 9 earnings unless it sell off before.
*****

Oil closed down over $2 in NYC at $58.68. Gold also closed lower by $20 at $581 and Treasuries were a teeny weenie weaker with the two-year t 4.66% and
the ten-year at 4.61%.
*****

Breadth turned positive in the last three hours on the NYSE but was neagative on the NAZZ at the close. Volume was brisk.

New highs contracted to 200 and new lows expanded to 121. That is
not a good sign for the bulls.

And there are three more casino
days left for fund games.
*****

Poor Souls Day 2006 Daily Comment

Thoughts

Asia was
mixed overnight as is Europe at midday. Oil is lower at $58.34 and Gold is at $618.

Treasuries have given back a tick
or two of their strong gains of yesterday.
*****

Mother Merrill has gone from buy
to neutral on Intel. Goldman has
moved from sell to neutral on Dell.
*****

Jobless claims were up 18,000 to 327,000 for the prior week.
*****

Unit Labor Costs increases 3.8% on a year over year basis while there
was now growth in Productivity which was flat in October. Productivity on a year over year basis was up 1.3% which is the slowest
growth rate since 1997.
*****

To raise a little cash and have
more money available for our longer time frame holdings we are selling CAT
at $60.60. That represents a $1 per share gain in a week. CAT is
going higher if the markets do but the percentage gain potential is in our
other stocks. We bought CAT for the bounce after a $10 per share drop and there
was a $3 bounce that we were too greedy to take. That is spilled milk.
*****

Oil closed down at $57.88. Gold
was higher at $627. Treasuries gave
up a few ticks with the two-year at 4.67% and the ten-year at 4.60%.

European bourses closed mostly lower.

The DJIA lost 13 points to end at 12018. The S&P 500 dropped 1 point to 1367 and the NAZZ gave up 1 point to 2333.

Breadth was 5/4 negative and volume
was active

New highs contracted to 160 and new lows expanded a bit to 90.

And tomorrow morning the Employment
Report for October is announced and the big boys and girls are all atwitter in
the casino ready for fund games with the number.
*****

1 November 2006 Daily Comment

Thoughts

The new month began in Asia
with most markets higher except Japan
with the Nikkei slightly lower. European bourses are fractionally higher at midday. Oil is off pennies at $58.42 and Gold
is up $5 at $612 in NYC trading. Treasuries are continuing yesterdayís rally
with the two-year at 4.61% and the ten-year at 4.59%.
*****

DreamWorks had better than
numbers and is trading $1 higher in the early going. The price rise is just in
time for Paul Allen of Microsoft fame and fortune who wants to sell his very
large DreamWorks position in a secondary. And right on cue several brokerages
have raised their recommendations on the company. Collusion? Of course not.
*****

Time Warner had good add numbers for its cable and internet
business and continues to have 15 million AOL subscribers which is down 2.5
million from last quarter.
*****

ADP announced a strong jobs gain number of 128,000 which ahs placed
the brakes on the bond rally. Of course ADP has been more wrong than right in
the last few months.
*****

We sold DreamWorks
at $28.70 for a one week $3 per share profit.
*****

October pending home sales were
down 1.1% and year over year they were down 11%.
*****

Ford said today that U.S.
October vehicle sales rose 8.1 percent compared to a year ago when demand fell
after a summer of showroom discounts. Ford sold 215,985 vehicles in the United
States last month, compared with 199,847
vehicles a year earlier. Results for Ford include its import brands and some
medium-and heavy-duty trucks and are not adjusted for the extra selling day in
October 2005. Adjusting for selling days sales were up 12% when 10% was
expected.† Ford also estimated its
inventory levels of Ford, Lincoln and Mercury brands at 622,000 units -- down
107,000 units from a year ago.
*****

Walgreenis
off $1.50 on news that CVS and Caremark may merge. Supposedly the merger will
hurt Walgreen. We bought a few shares of
WAG for a trade in our large/trading accounts in which we sold DWA this
morning.

We also repurchased shares
of Time Warner a few pennies higher than where we sold it last week
but down 50 pennies on the day after the initial reaction to their earnings
report this morning was negative. We thought the report was positive which is
why we reestablished the position in many of the accounts that owned it before
we sold ahead of earnings.
*****

From the WSJ : The New York Stock
Exchange, in a symbolic decision that underscores the decline of floor trading
amid the rising popularity of electronic trading, plans to shut about 20% of
its floor-trading space in the next 18 months.
*****

Investors Intelligence was 52% bulls and 28% bears.
*****

The Walgreen trade was
a bust and we decided not to carry it overnight because the
CVS/Caremark news is going to be more than a one day event. We sold it for a 50
pennies loss.
*****

Oil ended lower in NYC at $58.71. Gold gained closing at $612. Treasuries
were higher with the two-year going out at 4.64% and the ten-year at 4.56%.

European bourses closed higher on the day.

The DJIA dropped 50 points to 12030. The S&P 500 lost 10 points to 1368 and the NAZZ was off 33 points to 2333.

Breadth was more than 2/1 negative and volume was brisk.

There were 340 new highs and 75 new
lows.

And the big boys and girls have
two more days left for fund games this week.
*****

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